Investment Management: Strategies for Trading Shares and Portfolio Analysis

Investment Management involves purchasing and selling investments within a portfolio, and can include banking, planning, and taxes. This report discusses the strategies for trading shares and portfolio analysis, including the pros and cons of passive and active strategies, and an in-depth analysis of the S&P ASX 200 index. It also provides a list of stocks selected, why and which stocks performed better, and recommendations for holding or selling stocks.

Running head: INVESTMENT MANAGEMENT 0
Investment Management

INVESTMENT MANAGEMENT 1
Executive Summary
Investment Management is an expression that refers to the purchasing and offering of
ventures inside a portfolio, and can likewise incorporate managing an account and planning
obligations, and also charges. Investment Management has two general definitions, one
identifying with warning administrations and the other identifying with corporate fund. In
this report a detailed analysis of the strategies that a investor can use to trade the shares has
been discussed along with the positive and the negative effects of choosing any of the
strategy. The report also provides an in-depth knowledge of the S&P ASX 200 index and the
comparison of the portfolio with the set benchmark. The reasons have also been delivered to
describe why the stocks have been chosen and for what reason.

INVESTMENT MANAGEMENT 2
Table of Contents
Executive Summary...................................................................................................................1
Introduction................................................................................................................................3
Passive Strategy......................................................................................................................3
The basic reasons for using the passive strategies are............................................................4
After analysing the pros of the passive strategy there are some drawbacks which the
passive strategy is prone to are...............................................................................................4
Active Strategy.......................................................................................................................5
Advantages of the active strategy...........................................................................................6
Disadvantages of the Active strategy.....................................................................................6
List of the stocks selected..........................................................................................................7
Why and which stock performed better.....................................................................................8
PE model....................................................................................................................................8
Analysis of the stock..............................................................................................................9
Support and Resistance Levels...............................................................................................9
Conclusions and Recommendations........................................................................................10
References................................................................................................................................12
Appendix 1...............................................................................................................................14
Appendix 2...............................................................................................................................16
Appendix 3...............................................................................................................................17

INVESTMENT MANAGEMENT 3
Introduction
A portfolio is a cluster of the financial assets such as stocks, bonds, currencies, bonds, cash
and cash equivalents and also the counterparts of their funds which are inclusive of the
mutual funds, exchange traded and the close funds. The real estate, art and also the private
investments can form a part of the portfolio. These portfolios are managed by the financial
professionals or the investors directly and also through the money managers. It is natural to
have more than one portfolio for different purposes (Giansante and Dragun, Investment
Strategies Network, 2014).
Under the portfolio two strategies are mainly used by the investors to calculate the returns
and analyse the price at the end of the month or the quarter.
Passive Strategy
Passive management also called as the passive investing is the type of the strategy that is used
to track the market weighted index or portfolio. The tracking of the index involves the good
diversification of the investment, low turnover and the low management fees. With the low
fees the funds would generate the higher returns against the similar funds with the similar
investments but having the higher management fees and the turnover costs (Corter and Chen,
2016).
The most common market for the equity market is the passive management, where the index
funds tracks a stock market index. One of the largest equity mutual funds is the Vanguard
500 is passively managed. The two major firms like Black Rock and the State Street, are
primarily engaged in the passive management strategies (Edesess, LFG Inc, 2016).

INVESTMENT MANAGEMENT 4
The basic reasons for using the passive strategies are
 In the long term the investor will be having the market average equals to the average
before costs performance. Henceforth, the average investor will be beneficial more
from the reducing the investments cost in order to beat the average.
 The efficient market hypothesis illustrates that equilibrium prices of the market fully
reflects all the available information. There is still some kind of the information that is
still not reflected (Holloway, 2013).
 Reduce expenses: Passive Investing helps in reduction of the costs as it generally
costs around 0.20 to 0.30% a year in terms of the fees as compared to the 1.35% in
case of the active investing.
 Diversify into the funds using index: the investor is required to select the asset classes
they want to hold. The inherent strategy of the index will describe whether to buy or
sell the asset (Bouwman, Frishkoff and Frishkoff, 2013).
 Minimal Taxes: The limited buying and selling strategy under the passive investing
method tends to reduce taxes relating to the investment.
 Exhibit Discipline: during the market fluctuations it becomes easy to maintain the
investment discipline through relying on the strategy of an index fund puts a bridge
between the buying and selling decisions (Harvey, 2011).
After analysing the pros of the passive strategy there are some drawbacks which the
passive strategy is prone to are
 Usually the passive management is guaranteed underperform the index after costs,
which means that one cannot expect better or good returns against what the
benchmark delivers (Brinson, Hood and Beebower, 2015).
 When all the costs are accumulated and taken into consideration, it is confirmed that
the passive funds are not that cheap and can be expensive. There are several hidden

INVESTMENT MANAGEMENT 5
costs inclusive of the brokerage fees and taxes. Many of the fund managers tend to
publish the gross performance figures of the fees and the expenses and theses costs
are not transparent in nature (Malkiel, 2014).
 Fund managers in case of the passive investments might fail to replicate the index
with 100% accuracy because of the sampling errors and categories under which the
stocks are kept (Chandra, 2017).
 With the passive fund the investors’ new proceeds are forced to purchase the shares
which already form the part of the index and many of which are expensive and highly
over valued and limit the potential of the upside.
 Passive investment strategy fails to offer the risk management cover. For example
when the stocks in the class of the technology are outperforming the passive fund will
be tech heavy and thereby making the stocks more volatile in nature (Rudd, 2013).
 Regardless of the fact that the particular asset will give how much return the passive
investors are forced to buy simply because they form the part of the index.
Active Strategy
Active Management Strategy on the other hand refers to one of the portfolio strategies under
which the manager chooses the specific investments with the aim of outperforming the
benchmark index set for the investment (Gutiérrez and Philippon, 2018).
The idea behind using the active strategy by the managers is to make the ample utilisation of
the market inefficiencies by purchasing the securities which are below the original value or
by short selling the securities which are mostly above the existing price (HA Davis and Lleo,
2015). The methods which are discussed above can be used either individually or in the
combination. Here the managers believe in taking the less risk with the aim of creating an
investment greater than the benchmark. The active portfolio managers use a variety of the
perks and the methods to construct their portfolio. The techniques that are included in this are

INVESTMENT MANAGEMENT 6
price earnings ratio and PEG ratios, sector investments that give a base to the managers to
estimate the long term macroeconomic trends, the information on the purchasing stocks of the
companies which are not working in the market or which have been selling at a discount or
the intrinsic value (Fichtner, Heemskerk and Garcia-Bernardo, 2017).
Advantages of the active strategy
 There are several benefits of the active strategy among which one of them is it acts as
a tax efficient manner for the investors and the flexibility to react nimbly when there
are changes to a quality of the bond’s credit. It also allows the investment to adjust the
duration of the portfolio as the rates of the interest fluctuates and helps to manage the
risk (Lan, Moneta and Wermers, 2016).
 One of the strength of the active portfolio is that the active strategy provides an
opportunity to beat the market return and most of the fact the actively managed
mutual funds perform better than the actively managed peers.
 Dynamic administration enables portfolio directors to attempt different systems which
can relieve dangers related with specific market sections amid troublesome
circumstances. For example, if the saving money segment is battling because of poor
execution or confronting headwinds because of some new regulation, active managers
can reduce or eliminate exposure to the sector to reduce the overall risk to the
portfolio (Sushko and Turner, 2018).
Disadvantages of the Active strategy
 Exchanging gobbles up picks up.
 The average dynamic financial specialist isn't as broadened, which frequently prompts
second rate returns (Gao, 2018).
 Normally dynamic directors hold more money than do latent supervisors, which
harms returns.

INVESTMENT MANAGEMENT 7
 Numerous dynamic systems are not really fitting for the retail financial specialist.
List of the stocks selected
S. No. Company Company
Passive Stocks Active Stocks
1 Amcor Ltd ANZ Banking
Group Ltd
2 BHP Billiton Ltd Brambles Ltd
3 Commonwealth
Bank
Insurance
Australia
4 CSL Ltd National Aust.
Bank
5 Macquarie Group
Ltd
Origin Energy
Strong Buy
6 RIO Tinto Ltd Sceptre Group
Stapled Securities
7 Wesfarmers Ltd SOUTH32 Ltd
8 Westpac Banking
Corp
Suncorp Group
Ltd
9 Woodside
Petroleum
Telstra
Corporation
10 Woolworths Group
Ltd
Transurban Group
Ordinary
Shares/Units FP
Triple Stapled

INVESTMENT MANAGEMENT 8
Why and which stock performed better
The reason to categorise the stocks into the passive and the active is because of the trends of
the price and the ability to generate he returns in future. The above table determines the list of
the active stocks as well as the passive stocks.
Talking about the active stock in the quarter 2007 the total profit and loss of the active
portfolio is 1203.48 whereas that of the passive stocks is 28844.10. The reason behind such a
variance is the price of the stock which the investor segregates according to the trends. Under
the portfolio the price of the Macquarie Group Ltd is highest in the year 2006 and from in
2007 it reaches to the 46.33 which is still more than cumulative of the stocks in the active
strategy (Refer to excel).
PE model
PE Multiple is also used to compute fair value of the stock using earnings per share and
industry PE ratio.
PE Multiple Model: CSL Limited
Industry PE ratio 3.85
EPS of CSL Limited 1.52
Intrinsic Value 5.852
The results of PE Multiple Model show that the fair value of the stock is $5.85 which is
greater than the market price of $3.85 prevailing as on today. As per PE Multiple, the stock is
overvalued.
Analysis of the stock
The technique that can be used to determine the stock prices is the line chart in relevance to
the historical trends.

INVESTMENT MANAGEMENT 9
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
ANZ Banking Group Ltd
CSL Ltd
RIO Tinto Ltd
(Source: By Author)
The stocks which performed better are ANZ Banking Group Ltd, Transurban Group Ordinary
Shares/Units FP Triple Stapled, National Australian Bank and Sun Corp Group Ltd in the
active portfolio whereas in case of the passive portfolio the CSL Ltd, Macquarie Group Ltd,
RIO Tinto Ltd and Commonwealth Bank performed more than the normal benchmark of the
market. However, the CSL limited reached from 13.16 to 124.37 in the past ten years and the
Macquarie Group Ltd price rose up by 87.66 in the last ten years as can be observe from the
graph above. The rise in price indicated the investor that the stock will perform better and is
worth investing.
Support and Resistance Levels
The support and the resistant model is also one of the techniques to determine the
performance of the stock. For example under the passive strategy the CSL limited Stock’s
price is 197.56. The range if the stock is from 119 to 199.42. Thus it can be concluded that
the resistance level of the stock is 199.42 and the support level is 119. The price of the stock
cannot go down beyond the support level and if it falls there will be a severe crash however,

INVESTMENT MANAGEMENT 10
if it rises the revenue can be utmost. Therefore, these two techniques are the basic reasons for
choosing the stocks and are segregated accordingly.
(Source: Yahoo Finance, 2018)
Conclusions and Recommendations
At the ends of the year 2016 the balance of the Origin Energy Strong Buy and Sun
Corporation Group Ltd is 1900 and 300 shares respectively. As per the trends the Sun Corp
and the Origin energy are growing at a slow pace and therefore it is recommended to hold the
share until a suitable price is achieved. As per the portfolio the return are depicted in the form
of the table and as per the benchmark which is S&P ASX 200 the index return for the period
of the ten years is -37%. The stock of Amcor Ltd is sold entirely and the profit generated is of
7767.75 which is a reason why the stock can be purchased again on the other hand the stocks
of the Telstra Corporation can be sold entirely and shall not be purchased again as during the
period of the ten years the performance is below average and the returns are low. Therefore, it

INVESTMENT MANAGEMENT 11
is observed that the passive returns generated overall 9% and the active returns generated
17% and the portfolio prepared is better in terms of the S&P ASX200 index.

INVESTMENT MANAGEMENT 12
References
Bouwman, M.J., Frishkoff, P.A. and Frishkoff, P., (2013) How do financial analysts make
decisions? A process model of the investment screening decision. Accounting, Organizations
and Society, 12(1), pp.1-29.
Brinson, G.P., Hood, L.R. and Beebower, G.L., (2015) Determinants of portfolio
performance. Financial Analysts Journal, 51(1), pp.133-138.
Chandra, P., (2017). Investment analysis and portfolio management. McGraw-Hill Education.
Corter, J.E. and Chen, Y.J., (2016) Do investment risk tolerance attitudes predict portfolio
risk?. Journal of Business and Psychology, 20(3), p.369.
Edesess, M., LFG Inc, (2016) System and method for generating and displaying risk and
return in an investment portfolio. U.S. Patent 5,884,287.
Fichtner, J., Heemskerk, E.M. and Garcia-Bernardo, J., (2017) Hidden power of the Big
Three? Passive index funds, re-concentration of corporate ownership, and new financial
risk. Business and Politics, 19(2), pp.298-326.
Gao, R., (2018) July. Active Pursuit or Passive Escape? Revisit the Linkage between IFDI
and OFDI in Emerging Markets. In Academy of Management Proceedings (Vol. 2018, No. 1,
p. 11668). Briarcliff Manor, NY 10510: Academy of Management.
Giansante, J.E. and Dragun, B.C., Investment Strategies Network, (2014) Investment
portfolio selection system and method. U.S. Patent 6,275,814.
Gutiérrez, G. and Philippon, T., (2018) Ownership, Concentration, and Investment. In AEA
Papers and Proceedings (Vol. 108, pp. 432-37).

INVESTMENT MANAGEMENT 13
HA Davis, M. and Lleo, S., (2015) Risk-Sensitive Investment Management.
Harvey., C. R. (2011) Active Portfolio Strategy [online] Available from
https://www.nasdaq.com/investing/glossary/a/active-portfolio-strategy [Accessed on 27th
July 2018]
Holloway, C., (2013) A note on testing an aggressive investment strategy using Value Line
ranks. The Journal of Finance, 36(3), pp.711-719.
Lan, C., Moneta, F. and Wermers, R., (2016) Holding Horizon: A New Measure of Active
Investment Management.
Malkiel, B.G., (2014) Passive investment strategies and efficient markets. European
Financial Management, 9(1), pp.1-10.
Rudd, A., (2013) Optimal selection of passive portfolios. Financial Management, pp.57-66.
Sushko, V. and Turner, G., (2018) The implications of passive investing for securities
markets.
Yahoo Finance, (2018) CSL limited [online] Available from
https://in.finance.yahoo.com/quote/CSL.AX?p=CSL.AX&.tsrc=fin-srch-v1 [Accessed on
27th July 2018]
Yahoo Finance, ANZ bank Limited (2018) [online] Available from
https://in.finance.yahoo.com/quote/ANZ.AX/key-statistics?p=ANZ.AX [Accessed on 27th
July 2018]

INVESTMENT MANAGEMENT 14

INVESTMENT MANAGEMENT 15
Appendix 1
Portfoli
o of the
active
returns
S. No. Company
Date of
Purchase
Number of
Shares
Buying Price
including
Stamp duty
@0.04%
Investme
nt
Amount
($)
1
ANZ
Banking
Group Ltd
3
8,806 752
13
.88
10,4
31
2
Brambles
Ltd
3
8,806
1,
454
7
.17
10,4
31
3
Insurance
Australia
3
8,806
3,
559
2
.93
10,4
31
4
National
Aust. Bank
3
8,806 653
15
.97
10,4
31
5
Origin
EnergyStro
ng Buy
3
8,806
2,
737
3
.81
10,4
31
6
Scentre
Group
Stapled
Securities
3
8,806
6,
399
1
.63
10,4
31
7
SOUTH32
Ltd
4
0,724
6,
209
1
.68
10,4
31
8
Suncorp
Group Ltd
4
2,185
1,
120
9
.31
10,4
31
9
Telstra
Corporatio
n
3
8,806
6,
397
1
.63
10,4
31
10
Transurban
Group
Ordinary
Shares/Unit
s FP Triple
Stapled
3
8,806
2,
979
3
.50
10,4
31
Total
1,04,3
06

INVESTMENT MANAGEMENT 16
S. No. Company
Date of
Purchase
Number of
Shares
Buying Price
including
Stamp duty
Investme
nt
Amount
($)
1
ANZ Banking
Group Ltd 42,735 -
848 29
-
24,608
2 Brambles Ltd 42,735
1
,104 10
10,
711
3
Insurance
Australia 42,735
3
,359 8
26,
734
4
National Aust.
Bank 42,735 604 28
16,
996
5
Origin Energy
Strong Buy 42,735 3
,637 9
34,
402
6
Scentre Group
Stapled
Securities
42,735
6
,599
4
28,
112
7 SOUTH32 Ltd 42,735
7
,209 3
23,
500
8
Suncorp Group
Ltd 42,735
1
,720 15
25,
747
9
Telstra
Corporation 42,735
8
,397 3
22,
839
10
Transurban
Group Ordinary
Shares/Units FP
Triple Stapled
42,735
2
,379 12
27,
763
Total
1,92,
195
Cost of the portfolio
1,04,
306
Capital gains
87,
889
Quarterly profit for the period of 10 years
91,
310
Total
1,79,
199
Return over the period of
ten years
1.
718
Yearly return 17%

INVESTMENT MANAGEMENT 17
Appendix 2
Portfoli
o of the
Passive
returns
S. No. Company Date of
Purchase
Number
of
Shares
Buying
Price
includin
g Stamp
duty
@0.25%
Investment
Amount ($)
1 Amcor Ltd 30-Mar-06 13,907.6
9
3.80 52,883.9
9
2 BHP Billiton Ltd 30-Mar-06 2,741.1
7
19.29 52,883.9
9
3 Commonwealth Bank 30-Mar-06 2,251.1
0
23.49 52,883.9
9
4 CSL Ltd 30-Mar-06 3,734.0
9
14.16 52,883.9
9
5 Macquarie Group Ltd 30-Mar-06 1,509.1
4
35.04 52,883.9
9
6 RIO Tinto Ltd 30-Mar-06 2,165.3
8
24.42 52,883.9
9
7 Wesfarmers Ltd 30-Mar-06 3,255.9
0
16.24 52,883.9
9
8 Westpac Banking Corp 30-Mar-06 4,213.0
2
12.55 52,883.9
9
9 Woodside Petroleum 30-Mar-06 2,955.6
5
17.89 52,883.9
9
10 Woolworths Group Ltd 30-Mar-06 3,790.2
9
13.95 52,883.9
9
Total 5,28,839.8
8

INVESTMENT MANAGEMENT 18
S. No. Company Date of
Purchase
Number
of Shares
Buying
Price
includin
g Stamp
duty
@0.25%
Valued
1 Amcor Ltd 31-Dec-16 12307.68
9
14.82 1,82,399.9
5
2 BHP Billiton Ltd 31-Dec-16 841.1682
3
33.64 28,296.9
0
3 Commonwealth Bank 31-Dec-16 751.1009 74.83 56,204.8
8
4 CSL Ltd 31-Dec-16 734.0856
5
124.37 91,298.2
3
5 Macquarie Group Ltd 31-Dec-16 -1090.861 121.7 (1,32,757.8
4)
6 RIO Tinto Ltd 31-Dec-16 1,165.3
8
81.01 94,407.4
2
7 Wesfarmers Ltd 31-Dec-16 1855.902 49.45 91,774.3
5
8 Westpac Banking Corp 31-Dec-16 4013.024
3
$29.15 1,16,979.6
6
9 Woodside Petroleum 31-Dec-16 3655.651
1
34.9 1,27,582.2
2
10 Woolworths Group Ltd 31-Dec-16 390.2876
2
30.32 11,833.5
2
Total 6,68,019.3
0
Cost of the Portfolio
5,28,839.8
8
Capital gains
1,39,179.4
2
Quarterly profit for the period of 10 years
3,62,292.7
1
Total
5,01,472.1
3
Return over the period of ten years 95%
Yearly return 9%

INVESTMENT MANAGEMENT 19
Appendix 3
Return
on S&P
ASX 200 Index points
2006 5773.4
2016 5562.3
-0.37%